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The Most Reckless State

from the magazine

The Most Reckless State

New Jersey has been on an unsustainable hiring spree. Spring 2007
Economy, finance, and budgets
New York

New Jersey emerged last year as the country’s most fiscally unfit state, overwhelmed by huge budget deficits and stratospheric taxes. New Census Bureau data reveal a key reason why the Garden State is so abusive to taxpayers: the state and its local governments have been on a hiring bender, virtually unmatched across the nation. Since 2000, Jersey’s governments have signed up nearly 63,000 new full-time workers and “full-time equivalents” (a statistic that’s created by starting with part-time employees’ hours and figuring out how many full-timers it would take to work them).

The new workers place New Jersey fourth among states in total public-sector hiring growth, the census shows. Just three states—California, Florida, and Texas—hired more government workers than Jersey has since 2000, and they’ve got much larger populations. Also, those states’ populations expanded at least as fast as their public workforces did. Jersey’s population, by contrast, has increased by less than 4 percent, even as its state and local public-employee ranks have swelled 14 percent—double the national average.

Jersey’s payroll padding has been costly. Governments in the Garden State have inflated payroll spending by 38 percent, or $655 million, in the last six years—and that figure doesn’t include the steep additional costs of pensions and employee benefits. New Jersey and its municipalities would save about $250 million annually in payroll costs alone if public-sector hiring had merely kept pace with inflation and population growth.

It hasn’t always been this bad. From 1995 through 2000, public-sector employment in the state grew by just 2.7 percent under Republican governor Christine Todd Whitman. Jersey’s hiring binge started under temporary Republican governor Donald DiFrancesco, who replaced Whitman when she joined the Bush administration, and accelerated under Democratic governor Jim
McGreevey, who fueled government growth not only with tax hikes but with borrowing, too (a practice that the state’s supreme court later deemed illegal). State government led the way with a 15 percent increase in workers. However, McGreevey also facilitated local spending binges by increasing funding to municipalities, which used the money not to cut taxes but to boost hiring 12 percent. All this profligacy took place against the backdrop of a steep economic slowdown that began in mid-2001 and continued through most of 2006.

Meantime, Jersey’s typically more prodigal neighbor, New York State, has shown admirable restraint in hiring of late. Since 2000, public-sector jobs in New York State have grown by about 1.5 percent—less than the state’s rate of population gain. That placed New York 45th among the states in public-sector job expansion. Payroll increased just 22 percent, in line with both inflation and population growth. Of course, New York must maintain its abstemious ways to make up for
past hiring binges. The average state employs 530 government workers per 10,000 residents. New York, even with its recent discipline, employs about 616. New Jersey, meanwhile, has jumped in the last six years from 530 government workers per 10,000 residents to 587. If it wants to dig itself into the same fiscal hole that New York has been in for years, it’s doing a good job.

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